Best Unsecured Business Loans for 2019

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What is an unsecured business loan?

When applying for a small-business loan, many lenders look for collateral to secure the loan. This collateral usually comes in the form of real estate, large machinery or equipment, vehicles, etc. However, some lenders don't require any collateral to secure a loan and that usually means lenders only look to lend to borrowers they are extremely confident can pay back their loans. That can be measured by a borrower's personal credit score, the business's revenue, the profitability of a business, and more.

Because there are many business owners who are confident in their ability to pay back a loan but don't necessarily have a traditional form of collateral, some lenders offer unsecured loans. Most of the time, these lenders will apply a general lien on the business, meaning they can seize the entire business depending on the original agreement. However, if you're really unsure of your ability to pay back a loan, we would caution against applying for any type of loan.

Best Lender to Start With: SnapCap

SnapCap
SnapCap

Consider this if you want to compare multiple offers at once with a single application.

Financing Cost 19.99% - 49.99% APR
Loan Amount Range $5,000 - $1,000,000
Loan Term Range 3 - 36 months
Repayment Daily or weekly
Funding Time As fast as one business day

Good for

  • Businesses that want multiple offers with a single application
  • Businesses with FICO scores of 600+
  • Businesses that need funds within 24-48 hours

Bad for

  • Businesses in restricted industries (financial services, pawn shops, etc.)
  • Businesses that want monthly repayment schedules
  • Businesses that already know specifically which lender they want to apply with

Why we like it: By filling just a single application, borrowers are matched with multiple lenders that they qualify with. SnapCap offers the easiest experience in kicking off the search for financing by helping save time and effort. Not only does SnapCap offer matches to multiple lenders, it also offers matches to lenders that offer unsecured loans. Since SnapCap helps facilitate businesses with all sorts of credit scores, annual revenue, and more, borrowers are more than likely to find multiple matches depending on the strength of their profiles.

Drawbacks: While SnapCap has dozens of lenders within its network, it isn't 100% comprehensive. If borrowers want to conduct a completely comprehensive search and comparison of every single lender available, they'll have to continue to search beyond SnapCap. Also, SnapCap will match borrowers with lenders that also offer secured loans, so borrowers will have to be sure they're only considering unsecured products.

Best Unsecured Loans for Bad Credit: Fundbox

Fundbox
Fundbox

Consider this if you want a flexible business line of credit without putting up collateral.

Financing Cost 15.00% - 59.00% APR
Loan Amount Range $100 - $100,000
Loan Term Range 12 weeks
Repayment Weekly
Funding Time As fast as next business day

Good for

  • Borrowers with lower or thin credit scores
  • Newer businesses
  • Businesses that use online accounting or banking services

Bad for

  • Businesses that want more than $100,000
  • Businesses with no invoices or revenue

Why we like it: Fundbox doesn't require a minimum personal credit score. However, this doesn't mean that personal credit scores are ignored, they are checked during the approval process. Fundbox is designed to help meet the needs of business owners who happen to have poor personal credit scores but strong financials otherwise. Additionally, Fundbox offers both invoice financing and a business line of credit, which offers some product flexibility for business owners with different needs.

Drawbacks: While Fundbox doesn't require a minimum credit score to apply, those with lower credit scores will likely be subject to very high fees. Fundbox itself incurs a higher risk with its lenient requirements, and they're mitigated with higher fees. However, if your business is still able to generate a net positive outcome even with higher fees, we'd highly recommend utilizing Fundbox.

Best Unsecured Loans for Good Credit: BFS Capital

BFS Capital
BFS Capital

Consider this if you need a short-term business loan and have a minimum personal credit score of 600.

Financing Cost 1.11x - 1.49x factor rate
Loan Amount Range $5,000 - $500,000
Loan Term Range 4 - 18 months
Repayment Varies
Funding Time As fast as 48 hours

Good for

  • Fast financing.
  • Borrowers who can't qualify for a loan with a bank.
  • Borrowers who have lower credit scores.

Bad for

  • Cheap financing.
  • Borrowers who want to shop around before applying.
  • Borrowers looking for a variety of financing options.

Why we like it:BFS Capital offers both short-term business loans and merchant cash advances to those with personal credit scores of at least 530 and 600 respectively. However, we'd recommend that those with credit scores of at least 600 apply for even the short-term business loans, since those with higher credit scores are more likely to benefit from more favorable rates. One of the biggest benefits to BFS Capital's short term loan, however, is the amount of financing borrowers can take advantage of. Compared to other alternative lenders, BFS Capital offers one of the largest loans.

Drawbacks: BFS Capital's short term loans are repaid daily rather than weekly or monthly. This can be tough to meet for businesses that face cyclical or seasonal trends, so if you aren't sure that you can repay a flat fee on a daily basis, we'd recommend looking elsewhere. However, because payments are spread out over daily increments, they're often quite small and manageable.

Best Unsecured Loans for Excellent Credit: Credibly

Credibly
Credibly

Consider this if you want larger financing and also have an excellent credit score above 680.

Financing Cost 1.15x - 1.49x Factor rate
Loan Amount Range $5,000 - $400,000
Loan Term Range 6 - 18 months
Repayment Daily or weekly
Funding Time as soon as the same day

Good for

  • Quick financing.
  • Businesses six months or older (working capital loans and merchant cash advances only).
  • Unsecured loans.

Bad for

  • Long-term loans.
  • Businesses that need more than $400,000.
  • Businesses that want to make monthly payments.

Why we like it: Credibly doesn't require any collateral for its loans and also offers larger loans than comparable alternative lenders, which immediately makes it a strong option for any borrower looking for an unsecured loan. Credibly also offers flexible repayment options, which many alternative lenders do not. If your business can't meet the daily repayment schedule that many lenders require, Credibly is one of the top options for you. Credibly also has relatively lenient personal credit score and age of business requirements compared to similar lenders.

Drawbacks: We recommend that those with excellent credit scores apply to Credibly even though it has a low minimum credit score requirement, because Credibly prices its working capital loans with factor rates, which have a very high ceiling. In order to ensure that you borrow loans with the best rates, it is recommended to do so with a high personal credit score.

Best Unsecured Loans for Startups: LightStream

LightStream
LightStream

Consider this if you require financing to get your business off the ground but don't have any collateral.

APR Range 3.99% - 16.99% with AutoPay (rates vary by loan purpose)
Loan Amount Range $5,000 - $100,000
Loan Term Range 2 to 12 years
Funding Time Varies, same-day funding available (conditions apply)

Good for

  • Borrowers with good to excellent credit
  • Joint applications

Bad for

  • Using funds for postsecondary education purposes

Why we like it: We recommend personal loans from LightStream for startups since its loans are comparatively larger than other personal loans, and LightStream offers some of the most competitive rates in the market. LightStream also offers very fast financing, which makes it one of the best options for a business getting off the ground.

Drawbacks: A personal loan from LightStream is likely to be considerably smaller than a loan from a traditional small-business loan lender. However, many small-business loan lenders look for a minimum age of operations that a lot of startups don't meet. Also, LightStream won't issue a loan to the business but rather to the individual applying. This isn't necessarily a drawback, but it is something that should be kept in mind.

Methodology: How we Chose the Top Options

Small-business loans often come with a multitude of variables that make it tough to draw direct comparisons. One loan might be considerably larger than another but it could also be more expensive. Another could be cheaper but the application could process extremely slowly. Because of this, we prioritized certain factors when comparing different products.

Loan Size: We rank the size of loans as the most important factor when considering different loans. Having a loan that's large enough to finance your needs is the most important consideration. Therefore, the larger the loan offered, the higher it would rank.

Rates: Another important factor is how expensive the loan can be. It's tough to draw apples-to apples comparisons in the small-business space, primarily because different lenders use different types of rates. However, it's still an important variable since many small-business loans, especially those from online lenders, can be very expensive.

Minimum Requirements: The whole emergence of online lenders is due to the fact that traditional lenders, like banks, were too strict with their requirements, barring small-business loans from anyone who didn't have very strong credit scores or financials. However, even online lenders vary greatly in terms of what they require at a minimum level and those with more lenient requirements scored higher.

Speed of Funding: Finally, we ranked lenders by their publicly stated application processing and speed of funding. Almost every online lender can now provide financing within 48 business hours. However, if a lender fails to meet that new expectation, it would rank lower.

Justin Song

Justin is a Sr. Research Analyst at ValuePenguin, focusing on small business lending. He was a corporate strategy associate at IBM.

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